Service strategy for developing effective, high quality services

Services are very sensitive towards customer relations. Services are created in interactions between service providers and customers. The scope of services varies from simple self services into demanding expert services. One essential factor differentiating these is the characteristics of customer relationships. To develop an optimal service structure one has to understand how to classify services by taking into consideration customer relationships.

Service system

In my article Hautamäki 2011 I defined a concept of service system consisting of front office and back office information systems and service personnel. Customers are interacting with service systems by face-to-face connections with personnel or/and by online connections with information systems. There are similar concepts presented by Henry Chesbrough (2011) and James Teboul (2006), among others. The essential feature of service systems is the division between “front stage” and “back stage”.

In this blog I will present a service strategy model devoted to building effective services (see Hautamäki et al. 1990 and Apte&Vepsäläinen 1993). In that model each service is classified by two variables: the complexity of a service and the amount of knowledge about its clients. Teboul uses the term “level of interaction” instead of amount of information (p. 43) and Apte and Vepsäläinen use the term customer relationship. Complexity is a number of relevant factors affecting the success of a service. By combining these two variables we get a two dimensional service matrix (cf. Hautamäki 2011).

Service matrix

In the matrix we could identify three generic types of services which are “elementary service”, “standard service” and “special service” (Figure 1). For example, to reserve a time for doctor is an elementary service, which is simple and does not presuppose much knowledge on the behalf of a client. Take a blade pressure and make a report of results is a standard service which demands some expertise and some facts about the client. On the other hand, the analysis of clients’ diabetes is a demanding task suitable only to doctors with a special education and experience and a lot of knowledge form clients.

The matrix contains also two problematic “corners”, one in top right and one in bottom left. A service in top right corner collects too much information from clients, net needed in successful conduct of the service. Thus it affects additional cost to clients: it’s over-service. On the other hand, a service in bottom left corner is based on too few information about clients and might leads to errors and misconduct: it’s under-service.

Complexity of service/The amount of information about customer

High

Middle

Low

High

Special service

“Over-service”

Middle

Standard service

Low

“Under-service”

Elementary service

Figure 1. Service matrix and generic service types

Service types and stragy matrix

The service matrix helps to develop service organization suitable to the type of services. For each generic type of services a special kind of organization is optimal to service provider and to clients as well. Elementary services are suitable to organize as self-service space, which can be internet front office or other arrangements like a room for measuring blood pressure with simple equipments. Standard services presuppose personal help and some communication. Therefore an office with some service personnel is working organization. The educational criteria are not necessary very high. For special services a well educated expert is necessary condition for success. Often special services are given by hospitals, studios, consultancy firms etc. Let’s say that special services are produced by an expert organization. These organizations are presented in the Figure 2.

Type of service

/Type of service organization

Special service

Standard service

Elementary service

Expert organization

(studio)

Focused service

“Surveillance”

Office

Universal service

Self-service space

“Abandonment”

Instant service

Figure 2. Service strategy matrix

In the Figure 2 three optimal service strategies are presented. Focused service strategy is to provide special services by expert organization (eg. strategy of consultancy companies). Universal service strategy is to provide standard service in offices where customer could or must meet personnel (eg. strategy of DMV in USA). Instant service strategy customers get elementary services by their own actions mainly by online (eg. strategy of Amazon).

Note that to provide elementary services by an expert organization is beside expensive also “surveillance”. To provide special services by self-service is a risky business leading even to “abandonment”.

Information systems are applicable in all service organizations. In office type service organization personnel uses so called back stage systems, which are not open to clients. They may contain a lot of information about clients and their previous history, like medical records. Offices are also digitally connected to each other or to data bases of larger organizations like hospitals.

Teboul, James (2006): Service is Front Stage, Positioning service for value advantages. Insead.

HMV-Research

The origin of service strategy model goes back to the end of 80’s when I was a consultant in HMV-Research where a group of people developed the model. The members included prof. Ari Vepsäläinen, GEO Matti Mäkelin, Ph.D. Tapani Seppänen and myself. Ari is the mother of the model. I think that our thinking in HMV-Research was pioneering the service theory.